AU Q4 CPI preview and what lies ahead for the ASX200
Tony Sycamore January 24, 2022 2:01 AM
The rout in U.S. stock markets deepened last week on concerns over rising interest rates and heightened tensions between Russia and Ukraine. The broader U.S. share market has now fallen 8.3% from its high of early January, while the tech-heavy Nasdaq is down ~14% from its all-time high from November.
The negative lead from Wall Street weighed on the Australian share market, the ASX200, as it closed out the week almost 3% lower at 7175. The heavy falls coming despite last week's robust Australian labour force data and additional monetary policy easing by Chinese authorities.
Ahead of this Thursday's crucial FOMC meeting, the ASX200 will need to negotiate the release of Australian Q$ CPI data tomorrow morning, before the RBA's next Board Meeting on February 1.
Headline inflation is expected to rise by 1% q/q on the back of gains in petrol prices and new dwellings, taking the annual inflation rate up to 3.2% y/y. The trimmed mean (core or underlying inflation) is expected to rise 0.7 %q/q, taking the annual rate of underlying inflation to 2.4% y/y, above the 2.25% forecast by the RBA in November.
Presuming tomorrow's inflations numbers come in at or higher than expected, and following the robust jobs data last week, it will likely confirm the end of quantitative easing (QE) at the RBA's February meeting. It may also prompt the RBA to elect to shrink its balance sheets as bonds mature, aka quantitative tightening (QT).
The break of critical support at 7310/00 noted in this article last week here has seen the initial pullback target of 7150 reached in rapid time.
"A sustained break below 7310/00 would warn a deeper pullback is underway initially towards 7150 before 7000."
There remains scope for the pullback to continue lower towards 7030/00, which, if achieved, would amount to an ~8.5% pullback from the August 7632 high. To negate the bearish bias and provide the first indication that the correction is complete, the ASX200 needs to reclaim the 7320/00 breakdown level.
Source Tradingview. The figures stated areas of January 24, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.